- Market sentiment remains bearish at 53%
- 53% of all pending orders are to sell the British currency
- The nearest resistance is located around 1.3709
- Support is around 1.3230
- 57% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: US Markit Services PMI, US Goods Trade Balance, US Final GDP, US CB Consumer Confidence, FOMC Member Powell Speech
As reported by the US Census Bureau, there were 1.164 million constructions of residential buildings The UK Public Sector Net Borrowing figure improved with the latest release, which showed that the borrowing was at £9.7 billion in May, beating the £9.35bn forecast. Moreover, the April's data was also revised up to £8.2 billion from the initial £6.58 billion, meaning that it was significantly worse than first thought. An increase in the deficit has been detected mostly due to higher government spending, which rose to £56 billion, while central government investment rose up to 2.8%, followed by an increase in debt interest to 16.7%. There was also a downward revision to net borrowing in the preceding year, namely down to £74.9 billion, down £16.7 billion in comparison to the year before that, as reported by the Office for National Statistics.
Nevertheless, according to the Office for Budget Responsibility's March budget review, this figure is still above their target of £72.2 billion. The OBR also kept revising its medium-term forecasts, amid the government receipts failing to meet expectations, with them anticipating the government to miss its surplus target only starting from 2019. Overall, debt keeps rising, excluding taxpayer-backed banks, which was equal to 83.7% of GDP at the end of May, or £1.6 trillion.
US Services PMI is the only relevant event today
There are no substantial events due on Monday, that could influence the GBP/USD pair. This only event is the US Services PMI. The Services PMI, which captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in the US.
GBP/USD continues to fall after Brexit
The result of EU referendum polls caused the Sterling to plunge dramatically on Friday, reaching a 30-year low. However, as was expected, the Cable managed to stabilise above the 1.36 major level, but downward pressure remains. Moreover, the pair opened with a bearish gap today, and is likely to continue sliding down. The first support will be the current June low at 1.3230, namely Brexit's low, while the second support rests only around 1.2942, represented by the weekly S1. Furthermore, technical indicators are giving bearish signals in the weekly timeframe, suggesting the Pound is to edge lower by week's end.
Daily chart
The Sterling/Dollar pair appears to have entered a consolidation period after Brexit's slump on Friday. The bottom border is the 1.33 mark, but a drop even lower is also possible, due to the post-Brexit effect. Technically, with the breach of the support line on Friday, the pair is likely to experience more weakness.
Hourly chart
Bears are now outnumbering the bulls
Market sentiment remains bearish at 53% (previously 54%), whereas 53% of all pending orders are to sell the British currency.
Compared to Monday, there are also slightly more bears at OANDA - they take up 57% of the positions open with the Canada-based broker. Sentiment at Saxo Bank is still bearish, as here the number of bears exceeds the number of bulls by eight percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
Exactly half of traders (57%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price intervals were selected by slightly less than a fifth (13%) of the voters, namely the 1.46-1.48 and 1.36-1.38 ones, while the second most popular choice implies that the Sterling is to cost between 1.44 and 1.46 dollars in three months, chosen by 11% of the surveyed. At the same time, the mean forecast for Sep 27 is 1.4444.